German Industrial Output Rebounds in Sign of Recovery

Germany’s factory orders surged the most in eight months in June, boosted in part by contracts signed at the Paris Air Show, the ministry said yesterday. Photographer: Guenter Schiffmann/Bloomberg

Aug. 7 (Bloomberg) -- German industrial production rose in
June, adding to signs that growth in Europe’s largest economy
accelerated in the second quarter.

Output increased 2.4 percent from May, when it dropped a
revised 0.8 percent, the Economy Ministry in Berlin said today.
Economists forecast a gain of 0.3 percent, according to the
median of 41 estimates in a Bloomberg News survey. Production
climbed 2 percent from a year earlier when adjusted for working
days.

Germany, which faces parliamentary elections next month, is
benefiting from a nascent recovery in the 17-nation euro region,
its biggest trading partner. The nation’s factory orders surged
the most in eight months in June, boosted in part by contracts
signed at the Paris Air Show, the ministry said yesterday.
Manufacturing in the euro region expanded last month for the
first time in two years, according to a survey of purchasing
managers by London-based Markit Economics.

“The crisis is slowly ebbing,” said Thilo Heidrich, an
economist at Deutsche Postbank AG in Bonn. “Hard economic data
are following broad-based improvements in sentiment. That
supports the gradual economic recovery we expect in Germany and
the euro area in the remainder of the year.”

GDP Reports

“Industrial production has passed its weak phase,” the
Economy Ministry said in the statement. “Current sentiment
indicators clearly indicate positive progress in
manufacturing.”

European Central Bank President Mario Draghi said last week
that a “tentative” stabilization is under way in the euro
region after at least six quarters of contraction through March.

German and euro-area gross domestic product data for the
second quarter will be released on Aug. 14. The currency bloc’s
economy probably stagnated in the three months through June and
will expand 0.1 percent in the current quarter, according to a
Bloomberg survey of economists.

Chancellor Angela Merkel will seek a third term as German
leader on Sept. 22 on the strength of shielding her country from
the worst effects of the region’s debt crisis. Her Christian
Union bloc is leading with about 40 percent support among voters
to 25 percent for the Social Democrats, according to an Emnid
poll.

Signs of Weakness

The Bundesbank said last month that it’s seeing signs of a
slowdown in the German economy after growth expanded
“strongly” in the second quarter. The Frankfurt-based central
bank in June cut its 2013 growth outlook to 0.3 percent from 0.4
percent.

China, Germany’s third-biggest trading partner, has seen
growth cool for the past two quarters. Lanxess AG lowered its
2014 profit forecast yesterday as the chemical maker said it
sees no sign of a pick up in the second half of the year.
Salzgitter AG, Germany’s second-largest steelmaker, said on Aug.
5 it expects a pretax loss this year because Europe’s crisis is
weighing on demand.

Europe is still showing signs of recovery that may boost
consumption of German goods. U.K. industrial production
increased more than forecast in June. European countries
accounted for 69 percent of German exports last year, according
to the Federal Statistics Office in Wiesbaden.

Factory Orders

Growth has accelerated in the U.S., the destination for 12
percent of Germany’s shipments in 2012. The economy expanded at
a 1.7 percent annualized rate from April through June after a
1.1 percent pace in the first quarter, the Commerce Department
said July 31. German exports probably rebounded in June from a
slump in May, a Bloomberg survey shows before data tomorrow.

German factory orders, an indicator of future production,
jumped 3.8 percent in June from the prior month. Investment-goods orders from within the euro area surged 20.2 percent, the
most since June 2007, as pan-European planemaker Airbus SAS, a
unit of European Aeronautic, Defence & Space Co., booked orders
for 466 planes worth $69 billion at the Paris Air Show.

“Taking a glimpse into the second half of this year, we
think that the overall positive momentum will continue,” said
Andreas Rees, chief German economist at UniCredit Bank AG in
Munich. “Increasing Chinese headwinds will be compensated for
by impulses from the U.S. and especially from the euro zone as
indicated by recent business sentiment surveys and already
piecemeal hard data.”